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Is Chapter 7 Bankruptcy Right For Me?

Admitting that your debts are out of your control isn’t easy. It can be even more difficult to decide what to do next. Do you choose debt consolidation, mortgage modification, or bankruptcy? And if it turns out bankruptcy is your best choice, do you file for Chapter 7 or Chapter 13? We know how confusing the bankruptcy process can be. In this blog, we discuss Chapter 7 bankruptcy and its pros and cons.

Chapter 7 is usually the simplest and quickest form of bankruptcy. Chapter 7 is also called “liquidation” or “straight bankruptcy.” To put it simply, your assets are sold, your creditors are paid, and your debts are erased. You have a fresh start.  Interestingly, about 95% of all chapter 7s filed are “no asset” cases meaning no property was sold to pay debts, so don’t let that prospect scare you away.  There’s a good chance you won’t lose anything by filing a chapter 7.

In order to qualify for Chapter 7, however, you have to demonstrate that you don’t have the ability to repay a portion of your debt.  To that end, Congress has imposed a “means test” to help objectively determine whether you have the ability to repay some of your debts (by filing for Chapter 13, for instance).  If the results of the means test show that you have enough income to pay some of your debts, you may be able to file Chapter 13 to repay a portion of your debts and discharge the rest.

Once you file for Chapter 7 bankruptcy, all creditor collections against you must stop. This is called “automatic stay” and forces creditors to suspend all collection proceedings against you, including lawsuits, wage deductions, repossessions, phone calls, collection letters, etc.  Notice is sent by the court to all of your creditors.  You are then required to attend a “meeting of creditors” where the bankruptcy trustee (not the judge) will review your paperwork and determine if there are available assets that can be sold to pay back creditors.  After a short period of time (a couple of months) your debt is discharged, leaving you with a clean financial slate.

Pros of Chapter 7:

  • No maximum or minimum amount of debt
  • Debt is eliminated
  • Creditors cannot claim wages earned or assets acquired after filing
  • Proceedings go quickly; usually it’s over within six months

Cons of Chapter 7:

  • Can only file Chapter 7 once every eight years
  • Stays on credit report for 10 years
  • Filing for Chapter 7 damages credit rating
  • Very difficult to withdraw from a Chapter 7 filing

Call us toll-free today at 1-800-260-1402 for your complimentary initial bankruptcy consultation or visit one of our 100 offices across the United States. You can also read our many informative articles on our website,  For the best advice on filing for Chapter 7 or Chapter 13 bankruptcy protection, trust the experienced and caring attorneys at Jacoby & Meyers Bankruptcy Law.

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